Term
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Definition
Profit = total revenue – total costs
Profit = (price x quantity sold) – total costs |
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Term
| What is the major draw back of price competition? |
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Definition
| -Major draw back is that competitors have the ability to lower prices as well |
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Term
| What is the major advantage to Non-Price Competition? |
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Definition
| o Major advantage: a firm can build customer loyalty toward its brand |
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Term
| What are the causes for demand fluctuation? |
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Definition
-Presence of substitutes
-Dynamic environmental factors |
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Term
| What is Assessing Price Elasticity of Demand? |
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Definition
| – the percentage change in quantity demanded relative to a given percentage change in price |
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Term
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Definition
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Term
| What is the equation for Price Elasticity of Demand? What is the rule? |
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Definition
= (% change in QD/% change in P)
o The less elastic the demand, the better for companies to raise prices |
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Term
| What is a Marginal Analysis? |
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Definition
| – examines what happens to a firm’s costs and revenues when production or sales volume changes by one unit |
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Term
| Average fixed cost equation? |
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Definition
| fixed cost per unit. = fixed cost/# of units produced |
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Term
| What is variable fixed cost? Example? |
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Definition
| – vary directly with changes in the number of units (Twice as many workers = twice as many products produced) |
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Term
| Average Variable Cost equation? |
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Definition
| – the variable cost per unit produced = variable cost/# of units produced |
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Term
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Definition
| = (average fixed + average variable)x Q produced |
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Term
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Definition
| = (average fixed + average variable) |
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Term
| What is Marginal Cost (MC)? |
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Definition
| the extra cost a firm incurs when it produces one more unit of a product |
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Term
| What is Marginal Revenue (MR)? |
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Definition
| = the change in total revenue that occurs when a firm sells an additional unit of a product |
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Term
| Profit is highest when...? |
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Definition
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Term
| What is a Break-Even Analysis? What is the equation? |
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Definition
– the point at which the costs of producing a product equal the revenue made from selling the product
o Break-even point = (fixed cost/price – variable costs) |
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Term
| What are examples of Channel Member Expectations? |
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Definition
-Sales training
-Service training
-Repair advisory
-Cooperative advertising
-Sales promotions
-Program for returning unsold units |
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Term
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Definition
| – consumers are concerned about both price and quality of a product |
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Term
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Definition
| – individuals strive to pay low prices |
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Term
| What is Prestige Sensitive? |
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Definition
| – buyers focus on purchasing products that signify prominence and status |
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Term
| FTC Act and Wheeler Lea Act prohibit _____________________? |
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Definition
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Term
| Robinson-Patman Act and Clayton Act limit the use of _________________________________? |
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Definition
| price differentials for the same product class |
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Term
| What is Price Discrimination? |
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Definition
| – the practice of employing price differentials that tend to injure competition by giving one or more buyers a competitive advantage over other buyers |
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Term
| What are the Price Discounting categories? |
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Definition
-Trade Discounts
-Quantity Discount
-Cash Discount
-Season Discount
-Allowance Discount |
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Term
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Definition
| – a reduction off the list price a producer gives to an intermediary for performing certain functions |
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Term
| What is a Quantity discount? What is another type of them? |
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Definition
- discount for amount bought
– Non-cumulative discounts |
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Term
| What is a Non-Cumulative Discount? |
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Definition
| – are one-time reductions in prices based on the number of unites purchased, the dollar value of the order, or the product mix purchased |
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Term
| What is a Season Discount? |
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Definition
| – a price reduction given to buyers for purchasing goods or services out of season |
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Term
| What is an Allowance Discount? |
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Definition
| – a concession in price to achieve a desired goal (Trade-in allowance – turn in old item when buying a new item) |
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Term
| What does F.O.B Factory mean? What is it? |
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Definition
| (Free On Board) – price indicates the price of the merchandise at the factory, before it is loaded onto the carrier, and thus excludes transportation costs |
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Term
| What does F.O.B Destination mean? What is it? What is it used for? What is unique about the product mix? |
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Definition
(Free On Board) – price means the producer absorbs the costs of shipping the merchandise to the customer
-Used to attract distance customers
-Both FOB pricing models can be difficult to administer especially when the firm has a wide product mix and wide consumer dispersal |
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Term
| What is Transfer Pricing? |
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Definition
| – occurs when one unit in an organization sells a product to another unit |
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Term
| What is Actual Full Cost? Equation? |
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Definition
| – (all fixed cost + variable expense) / # of units produced |
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Term
| What is Standard Full Cost? Equation? |
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Definition
| – calculated based on what it would cost to produce the goods at full plant capacity |
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Term
| What is Market-based Cost? Equation? |
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Definition
| – (market price – small discount – other expenses) |
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Term
| What are the types of Transfer pricing? |
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Definition
-Actual full cost
-standard full cost
-cost plus investment
-market-based cost |
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